Is Kenney Hrabik 'Hit Piece' On Target?

A mailer sent to Rancho Santa Margarita residents paints local businessman Kenney Hrabik in a negative light in his bid for a seat on the City Council. In red block letters, the mailer says: "Rancho Santa Margarita residents deserve honest leaders. Do not vote for Kenney Hrabik."

As Hrabik tries to connect the dots on the mailer's source—he suspects opponents Carol Gamble and Tony Beall are in cahoots with the political action committee that allegedly sent it, Concerned Californians for Effective Government—a larger question looms:

Is the mailer accurate?

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Hrabik's response through an attorney was to send a cease and desist letter to the PAC, saying the piece "contains several false and misleading statements about Hrabik and may subject the Committee and others to substantial liability and defamation."

The letter also asks that Concerned Californians for Effective Government "attempt to rectify the harm done by such mailers by issuing a written, public apology to Hrabik acknowledging that the mailer misstated the facts regarding Hrabik's claim and settlement."

The specific statements Hrabik cites as false are:

• "Hrabik filed frivolous litigation claim against our city" ... and "threaten(ed) to sue our City for approximately $380,000."
• "Hrabik took $50,000 of our tax dollars to drop his claim" and "took $50,000 of our tax dollars for himself."

"It's very disappointing that my opponents would stoop to this level," said Hrabik,  calling the mailer "a hit piece."

Here's a look at the mailer's main claims (in bold):

Hrabik filed frivolous litigation claim against our city.

As far as Patch knows, no formal court filing against the city was ever made. Rather, Hrabik signed a formal settlement agreement with the city in which he received $50,000 and agreed not to sue. He calls it a fee waiver or simple refund. Historically, the city only enters into such settlements when threatened with a lawsuit.

Here's the back story: In an effort to recoup some of his losses from the Conditional Use Permit (CUP) process for his Dove Canyon Courtyard business, Hrabik presented a "processing fee waiver request," in which he asked the city to reimburse $50,000 of the $60,000 CUP fees he had paid "in protest." In doing so, he indicated he also had paid $85,000 for legal counsel and suffered $235,000 in lost revenue over 28 months. Grand total: $380,000. After being advised by then-city manager Steve Hayman the city would never refund the full $60,000 in CUP fees—Hrabik wrote a letter saying he was willing to settle for $50,000 and indicating an alternative could be litigation and that his overall losses were seven times the amount he sought.

Hrabik wrote: "I would be willing to accept this $50,000 along with the $600 from fines I prepaid (that were overturned in superior court but not refunded) and move on. I reserve the right to change my mind on this matter at any time until an offer is made by the city."

Hrabik took $50,000 of our tax dollars to drop his claim.

The city, at the direction of the City Council, reimbursed Hrabik's $50,000 conditional use permit fees to bring the situation to a close and end the threat of a potential lawsuit. The City Council candidates differ on whether the agreement was a settlement or a refund. Either way, the city had to pay $50,000 for costs incurred during the permit process for sound engineers, attorney fees and other items that would normally be covered by the business seeking the CUP.

Judge ruled that Hrabik made an illegal and false statement.

Hrabik submitted a ballot statement that was legally challenged by RSM resident April Josephson—an avid supporter of Beall and Gamble—who wanted a laundry list of things stricken from it. The judge ruled, based on a 2006 letter Hrabik wrote to the city explaining he was moving his business from Lake Forest to RSM to be closer to home, and based on the national economic peak having occurred after his move, that Hrabik could not say he moved his business to RSM after the recession started. So, a sentence that said, "When the recession started and I saw so many of Rancho families out of work," was changed to delete the phrase "the recession started and."

Although the official ballot statement now reads, "When I saw so many of Rancho families out of work, I moved my business to RSM," the original wording still (as of Nov. 4) exists on Hrabik's campaign website under "Ballot Statement."

Hrabik Says: A national survey ranks the RSM business climate behind New Orleans, Philadelphia and even El Centro...

Hrabik and Planning Commissioner Peter Whittingham cited the Milken Institute Study for Best Performing Cities as the basis for their claim the city was not business friendly, and this was part of the foundation for the city's needing a "Voters Bill of Rights." They used figures for greater Orange County—collectively Santa Ana, Anaheim and Irvine—and claimed it represented Rancho Santa Margarita. RSM was never part of that national survey.

Hrabik Says: The City of RSM has a more generous public pension system than San Francisco.

Retired City Manager Hayman, who was a pension administrator in Costa Mesa before coming to Rancho Santa Margarita, said, "I did enough research into San Francisco to absolutely know that was an untrue statement." It should also be noted that RSM was one of the very first cities to adopt some level of pension reform. Additionally, RSM spends less on pensions per capita than any city in Orange County and is dealing with fewer than two dozen employees. 

Hrabik Says: City Council members have "exploited loopholes" to pay themselves full-time pensions.

Hayman, who retired as RSM's top administrator in July, said the City Council has never participated in a pension program. City Council members participate in a "defined contribution plan" which, according to Hayman, "is what pundits across the state are clamoring to get everyone to do." He said council members receive a percentage equal to the contribution that would be going to Social Security. Essentially, those funds can be placed into a 401K-type of program that will be available after the age of 59. It could grow in value or, if poorly invested, be worth nothing. Council members can do this in lieu of receiving health benefits. Hrabik said he wants to remove the health benefits option for elected officials.